From Chapter 9 of Lords
of Finance. I wish I could find the whole chapter online to post, as it
is a very good one to review when thinking about the similar choices many governments
are facing today. The war in this quote is referring to World War I.
“A simple
analogy of the choice between deflation and devaluation might be that of the
man who has put on weight and is having a hard time fitting into his clothes.
He can either choose to lose the weight—that is, deflate—or alternatively
accept that his larger waistline is now irreversible and have his clothes
altered—that is, devalue. Whether to deflate or devalue became the central
economic decision for every country after the war. The burden of deflation fell
on workers, businesses, and borrowers, that of devaluation on savers. The fate
of the world economy would hinge over the next two decades on which path each
country took. The United States and Britain took the route to deflation,
Germany and France that of devaluation. ” –Liaquat Ahamed, Lords of Finance